Taxing the Rich?

Yeah, Governor O’Malley would like you to think so. He claims that his budget will ensure that “the rich will pay more”, and that “everyone will pay their fair share.” For example, he claims that his plan will increase taxes on corporations (by eliminating the technique of “combined reporting”), and by increasing the corporate income tax by 14%.

I have to suppose that O’Malley is neither stupid nor devoid of advisors with some knowledge of economics. Even common sense tells you that firms see these taxes as a cost of doing business, and will pass along those costs to consumers to the extent possible. Economists study what’s termed the “incidence” of taxation, i.e., upon whom the costs actually fall. The degree to which those taxes can be passed along depends on the nature of the good or service being taxed, and the properties of the demand and supply in the relevant markets. But for the most part, though, we consumers can expect to pay most of the costs of these taxes.

And that’s only some of the taxes. The rest of the set of proposed tax increases are unequivocally regressive, such as the 20% increase in the sales tax, and the expanded set of goods and services that will be taxed. Other proposed increases seem specifically designed to exacerbate the high cost of housing, such as the increased property transfer tax and the titling tax.

We don’t have to give the governor political cover or buy into the myth that “the rich” or evil corporations will pay these increased taxes. When O’Malley says that, remember that we consumers will be paying the billions in higher taxes for this budget.